How was that a stretch? They were referring to George's strategy of pretending it didn't happen. It was a perfect fit as well as what Shawn tried to do when he first saw Juliet. He tried to pretend like nothing was wrong.

Elin actually was the only killer in both "realities". In the one that's just in Shawn's head where he and Jules are together, Elin dies because Shawn wasn't there to get her to the hospital. So she died of the injuries inflicted by the man she attacked.

It's hard for me to think Juliet is dumb for believing Shawn after watching "Shawn Rescues Darth Vader". It's also hard for feel she's not justifiably upset.